Anywhere else in the region, such a conference would barely have raised an eyebrow. There were men in suits discussing deals and swapping business cards, company stands showing off little models of construction projects, investors hurrying to the next lecture about the future of the local financial services industry.

Yet here, in the occupied Palestinian territories, the smooth normality of a humdrum business event struck many as nothing short of spectacular.

More than 1,000 investors, business leaders and officials from around the world gathered in Bethlehem last week to attend the first Palestine Investment Conference. And, judging by the exuberant mood of hosts and guests, the meeting succeeded in its primary aim: persuading foreign companies and financiers that the Palestinian territories can be a profitable destination for their dollars, dinars, euros, and - yes - even their Israeli shekels.

Palestinian companies were there to present some $2bn worth of investment projects. Several deals were signed, and the frenetic activity inside the business-to-business meeting room suggested that more agreements and joint ventures may yet emerge as a result of the conference.

At first glance - and maybe also at second and third - the Palestinian territories are an improbable place to invest your money. The Israeli occupation and the continuing strife between rival Palestinian factions mean the territories remain more violent and unstable than even the most hardened investors normally accept. The roadblocks and checkpoints, walls and fences that slice up the West Bank and seal off the Gaza Strip make it hard for business people to move goods and employees around, let alone out of the territories.

Poverty and unemployment are sky-high and rising in the Gaza Strip, where the private sector has essentially ceased to exist. In the West Bank, things are better but at least one in five Palestinians is out of work. Overall, Palestinians are today 40 per cent poorer than they were in 1999, and this year even the modest growth forecast by the World Bank will not be sufficient to cancel out the rise in population. In real terms, Palestinian incomes will be stagnant at best in 2008.

And yet, it would be wrong to portray the men (there were no more than a handful of women at the conference) who attended last week's meeting as delusional. For a start, they are dealing with a business community that may be small but that is also vibrant, smart, resilient - and hugely idealistic. Many Palestinian business leaders built their lives and fortunes abroad, but returned after the Oslo agreements in the mid-1990s to help build what they hoped would be a new and flourishing state. Most could leave Ramallah, Nablus and Jericho tomorrow for an easier life in the US, Europe or the Gulf. That they do not is testament to their commitment and optimism.

Moreover, as the recent performance of the Palestine Securities Exchange shows, it is possible to make money in the occupied territories. Since the start of the year, the index has soared by more than one-third - comfortably outperforming all other Arab markets. Ramallah is experiencing something of a building boom, and all over the West Bank businesses are taking advantage of the recent political stability engendered by the reform-minded government of Salam Fayyad, the prime minister, and capitalising on an influx of donor money.

The fundamental question raised by last week's investment conference is therefore which of the two economic realities will eventually come to dominate: the optimism of the 1,000 business leaders in Bethlehem, or the depression of the millions of Palestinians living in Gaza and the poverty black spots of the West Bank?

The answer depends, as so much else in the Middle East, on politics. As one veteran Palestinian businessman said recently: "If you believe the current peace talks will lead to an agreement, you should invest in Palestine. If not, you shouldn't." In other words, real economic revival depends on a deal that will eventually ensure Palestinian statehood, political stability, legal certainty, freedom of movement and access to foreign markets.

Without it, last week's conference may prove to be nothing more than the enchanting veneer on top of an economy mired in ever-deepening gloom and depression.

The writer is Financial Times bureau chief in Jerusalem tobias.buck@ft.com